Lets analyze key economic parameters of India first and then see its impact on the markets. India’s European export exposure is limited to 3% of GDP. India’s public debt, at 75% of GDP, is close to peripheral Europe’s. The key difference?India’s Debit is held internally. FII interest in gilts is capped at US$5bn. FII investment in corporate bonds, now US$10bn, is also capped at US$15bn. This proves that India should then escape almost unscathed.

In the Worst case, even if Greek contagion stubs out global recovery, analysts would still expect growth to clock a healthy 6.3% in FY11 if the monsoons are normal. Rural recovery from last year’s drought should then buffer the inevitable collapse of exports. The up and coming summer harvest should push up farm income and Rural demand should strengthen further in 2HFY11 if normal rains are normal sow a good autumn crop in July.

In the near term, India is likely to remain stable and range bound unless FIIs start selling to book profits in the runup of 80% YoY / to make up for losses in other markets.